Manganese’s many uses in infrastructure and building materials make its market a strong barometer for gauging the world economy. Soaring growth in countries like China and India has led to high global demand. In this exclusive interview for The Critical Metals Report, Helen O’Malley, a bulk manganese specialist with CRU International in London, discusses how manganese prices are closely tied to the economy and, in contrast to exchange-traded base metals, overwhelmingly determined by supply and demand.

The Critical Metals Report: Economists often use the price of copper as a barometer of global economic health because of its many uses in infrastructure and building materials. Could manganese prices be an even more effective barometer of global economic health? What is your prognosis of global economic health based on what is happening in the manganese market?

Helen O’Malley: Unlike copper and other base metals, manganese is not exchange traded. The price of manganese is overwhelmingly determined by supply and demand. Speculation and confidence levels do not really come into play. Manganese pricing has a lot to do with the general health of the economy. For instance, industrial production and, therefore, levels of demand for steel in the developed world have not recovered to levels seen before the financial crisis. Therefore, a state of overcapacity exists in the manganese ferroalloy sector, so prices have been struggling to reach previous records. This is even though global demand for manganese is at a record high because of soaring growth in countries like China and India.

TCMR: You wrote that for the first time in Q410, China became a net importer of silico-manganese and high-carbon ferromanganese. Will this continue?

HO: That was the first time China became a net importer of manganese alloys, specifically silico-manganese and high-carbon ferromanganese. China has always been self sufficient in manganese alloys and has a great deal of overcapacity itself. To become a net importer is quite surprising.

TCMR: What is the impact?

HO: It is a symptom of the oversupply in the global market. Prices have gotten so low that it is now economical for some mills in China to import manganese alloys. This is not likely to be the start of a meaningful trend nor is China going to suddenly become a major net importer of manganese alloys.

TCMR: China has been stockpiling copper and other base metals. Is it stockpiling and hoarding manganese?

HO: It’s true, stocks of manganese ore at Chinese ports have built up sharply in the last year. In early 2010, stocks were around 2 million tons (Mt.). In May of this year, they peaked to almost 4 Mt., but since then they have eroded back to around 3.5 Mt. The widespread belief is that most of these stocks are held by Chinese traders who bought the material back when the price was higher, in 2010 or even earlier. They will not be releasing this material into market until the price recovers.

The natural level of stocks is bound to be higher now because consumption levels are higher. On a consumption-adjusted basis, stocks are actually around 2008 levels.

TCMR: In July’s CRU Monitor, Bulk Ferroalloys edition, you wrote, “Offsetting the 5% year-on-year drop in Japanese crude steel production, South Korea output was 19% higher than it was in June 2010, while Indian production rose by 7.3%. Output gains have been much smaller in the European Union and the U.S., both in June and for the first half of this year as a whole.” This does not mention China’s percentage gains in steel production, but illustrates the ongoing shift of wealth from the West to the East. Is that permanent?

HO: We can see an extended period of weak and below-trend growth in Europe, the U.S. and Japan. In those countries, the structurally high levels of national debt and the measures taken to address this debt will most likely weigh down on growth for some years. This is a stark contrast to economic growth in China, India and other Asian nations.

TCMR: China now produces approximately 40% of the world’s steel. Would you prefer that steel production be spread over more countries?

HO: Traditionally, steel production facilities are located to serve local or regional demand. China produces so much steel because it consumes so much of it. However, some locations are more cost competitive than others because of factors such as access to raw materials, labor costs and energy costs. Over time, we could see a higher concentration of steel production in lower-cost regions of the world. On the other hand, it is very difficult and costly to permanently close steel facilities, which is perhaps why we are not yet seeing an obvious shift taking place.

TCMR: How is Chinese dominance in steel production influencing the manganese market?

HO: China now accounts for around 40% of global steel production. Five years ago that share was only 30%, and 10 years ago it was 15%. China’s increasing dominance as a steel producer has definitely had an impact on all raw materials markets. It has had an impact particularly on the market for manganese ore because China must import over half of its requirements for manganese ore. It’s a similar situation to what we see in the iron ore market.

TCMR: You said that the manganese ore market has been in a state of oversupply for about a year and that is pushing prices down. When will the market turn? Is the ore market structurally tight or are we on the brink of structural oversupply once a number of development projects in Africa come onstream?

HO: Manganese ore prices have been falling for the better part of a year now, but it seems that prices have been brought low enough to cut out a proportion of the higher-cost supply from the market. Port stocks have been falling for several months now and price stability has returned. This tells me that supply and demand fundamentals are in much closer balance now.

TCMR: When we spoke last May, manganese ore was priced at roughly $8/dry metric ton unit (dmtu). What is a dmtu going for now?

TCMR: We’re talking about the ore, so that is the straight mined product. What is your near-to-medium term outlook for the manganese alloy market?

HO: In the medium term, looking at the next five years, the drawn-out recovery in steel production in the West will ensure that overcapacity in the manganese sector remains an issue. Ultimately, this means that prices and margins for manganese alloy producers will remain under pressure. One thing to watch is the market for refined ferromanganese. This particular form of alloy is used mostly in the production of high-grade and specialty steel and can also be used as a substitute for electrolytic manganese metal in some steel applications. Intensity of use of refined ferromanganese is rising relatively sharply, so we could see some more upside with demand and pricing of this grade of manganese alloy in the medium term.

TCMR: You had discussed earlier how steel makers in Europe are starting to substitute out the more expensive ferromanganese in favor of the cheaper silico-manganese. What is the impact?

HO: Because ferrosilicon prices have been a lot higher than silico-manganese and high-carbon ferromanganese prices, it is thought that some steel mills in Europe are trying to switch away from the combination of ferrosilicon and ferromanganese by consuming more silico-manganese. Not all steel mills can do this switch for technical reasons and, in the U.S., most mills would not consider switching. We are now slowly starting to see the price gap between ferrosilicon and the manganese alloys close up. But another thing to remember is that ferrosilicon prices are also strongly governed by underlying production costs, which have come under strong upward pressure recently.

TCMR: Is it experimental?

HO: No, the concept of switching between alloys has always been known to the steel industry. It has to do with the economics of using the alloys at their current pricing. However, as I mentioned, technical limitations mean that mills wouldn’t necessarily do this on a short-term basis. Also, some mills are constrained by the type of steel they are producing.

TCMR: Can I get some base prices for a few of the main products you deal with? When you talked to The Gold Report in May 2010, you said they couldn’t manufacture steel without manganese, and manganese ferroalloy prices were 40%–50% lower than the peak levels of 2008. What is the per ton price of ferrosilicon, silico-manganese, silicon metal and high-carbon ferromanganese right now and do those prices compare to 2008 or even a year ago?

HO: Manganese ferroalloy prices have, on average, declined since May 2010. Back then, silico-manganese was priced at around $1,520/metric ton in the U.S. market. Now it is priced at around $1,370/metric ton. We’ve seen a similar decline in the other manganese alloy grades. The reason for this downward trend is the oversupply of manganese alloys. The other important factor is that the manganese ore price has been in decline with manganese ore being the main cost driver of alloy production.

TCMR: What are the main factors behind that fall in the price of ore?

HO: An oversupply. In 2009, rock bottom prices caused the manganese ore sector to aggressively cut its output. When prices recovered over the second half of 2009 and into 2010, production ramped back up to full capacity, ultimately pushing the market back into oversupply. You tend to get this lagged supply response in bulk mined markets because it takes time to ramp up or ramp down production at large scale mine operations and to tune output precisely to the level of demand. In the last year, there’s been a degree of oversupply, but now we are seeing that some of the mines are trimming output again. It is a cyclical effect.

TCMR: Is the sector less exciting to cover when prices are in decline?

HO: No, because you have developments such as production cuts. What becomes interesting is determining who is left in the market and who is going to be forced out of production first.

TCMR: You mentioned earlier that there are a number of development projects coming on in Africa, but we have oversupply now. Is that going to push back the development timetable with those projects or will prices be driven down even further?

HO: South Africa is an interesting example because if you add up all of the potential new supply, it comes to approximately 15 million tons per year (m tpy). This is huge in a market that is around 45 m tpy. In reality, though, in South Africa, restrictions on rail and port capacity will mean that only a portion of this will find its way onto the seaborne market in the next five years. Infrastructure is also a major issue in other African countries where miners are hoping to develop projects. The market for manganese ore could stay tight for some time because these projects will not come online at the advertised dates.

TCMR: Right now we are seeing approximately 95% of all rare earth production being controlled in China. Will we see similar control in the manganese metal side?

HO: Absolutely. Currently, China controls around 95% of the world’s supply of manganese metal and that represents a great deal of risk to consumers of manganese metal in the West, such as in Europe, Japan and the U.S. Not only is there a lot of price volatility, but security of supply is also an issue.

TCMR: Without recommending specific companies, what kinds of manganese or ferromanganese projects are of most interest to the Chinese?

HO: The Chinese and the Indians seem desperate to get their hands on any medium- and high-grade ore deposits. This is to provide them with a greater security of supply of the essential steel-making raw material. You cannot make steel without manganese, so it is a strategic move as well. The challenge is tracking down the remaining high-grade or even medium-grade projects. You want to find one that is not only economical to mine, but also has access to infrastructure.

TCMR: Like a port.

HO: Exactly, a rail or port. South Africa and other African countries have naturally attracted a lot of interest because of the abundant resources of high-grade and medium-grade manganese ore. There are also high-grade deposits elsewhere, such as Indonesia, Australia, Turkey and South America.

TCMR: Have you visited these projects?

HO: I just returned from South Africa where I visited a number of the mines currently in production, as well as a number of the companies in the development stage. It was a very interesting trip.

TCMR: Are there projects in more secure jurisdictions like North America or Australia that are coming onstream in the near-to-medium term?

HO: Australia has a long list of projects, and a number of companies have projects on the table in North America. North America does not have high-grade manganese ore or even medium-grade manganese ore, but there does seem to be, in parts, abundant supplies of low-grade manganese ore.

Some of these companies are looking to upgrade the low-grade manganese ore into a product that can be sold into the market. One of the major products they are looking at is electrolytic manganese metal, which has a variety of end uses, but the main end use is in the steel industry.

TCMR: How far off are those?

HO: Most of these companies are slating project startups toward the end of a five-year horizon. Some of them are making progress with exploration and defining their resource, but there are still several stages in the process to go, including raising finance and bankable feasibility studies.

TCMR: Are there any projects close to putting together a bankable feasibility study that could see greater interest as a result?

HO: Not that I know of, but that is not to say they are not at that stage.

TCMR: Can you provide me with a couple of themes in the manganese space that you expect to play out over the next year or two?

HO: In the next year or two, we could see some of these manganese ore projects develop. Some of the greenfield projects in Africa should move forward and even come into production. It will be interesting to see how that impacts market fundamentals. And I think it will be interesting to see what happens in the manganese metal space because we have definitely noticed interest for companies to try and reduce their current dependency on Chinese supply. With China currently the world’s main producer of manganese metal, steel producers, aluminum producers and other consumers in Europe and the U.S. are dependent on Chinese exports. People are seeking alternative sources of supply.

The structural dependence on Chinese supply has triggered great interest in investing in manganese metal outside of China. Some of these projects happen to be located in North America, but there are also projects in Russia. At present, there is only one manganese metal producer outside of China, and that’s in South Africa.

TCMR: What is the name of that company?

HO: The Manganese Metal Company of South Africa. A number of potential manganese metal projects are in the pipeline, including in North America, but also in other parts of the world. Certainly, that whole area of the market seems to be quite hot right now because prices are high and we have this structural dependency on China.

TCMR: Thanks very much.

Helen O’Malley is a bulk manganese specialist with CRU International in London, England. She manages research activities in the steel raw materials markets including iron ore, metallurgical coal and coke, and the bulk ferroalloys, including manganese, ferrosilicon and silicon metal. Since joining CRU in 2005, she has built up considerable expertise in the bulk raw materials markets with particular focus on iron ore and ferroalloys but more recently extending her involvement across all of the major raw materials markets.

Rob McEwen has become a legend in the gold mining industry by skillfully assembling and building mining companies over the past 20 years. In this exclusive Gold Report interview, he explains his rationale for $5,000/oz. gold and $200/oz. silver and how the factors leading to those price levels will affect the industry and the companies exploring for and producing the metals.

The Gold Report: Rob, you’ve been quite vocal about your belief that gold will reach $5,000/oz. (ounce) and silver $200/oz. for silver. Why and when will that happen?

Rob McEwen: Your readers need to appreciate: Gold is money. It is currency. I think the number of people familiar with gold will grow as people see gold as a currency. China, India, Russia are buying gold to diversify their foreign reserves. To restore the confidence in currencies, I think some central banks, such as the Chinese and possibly the Russian, will increase their gold holdings to the level that the percentage of their total currency will be greater than that of any other currency in the world. At that point, they will assert that their currency should become the reserve currency of the world.

If you look at the last gold run, gold went from $200/oz. in mid-1979 to $800/oz. in early 1980. During the 10-year period of 1970–1980, we saw a 20-fold increase in the price, from $40/oz. to over $800/oz. We also had a 20-year low in 2001 of $250/oz. If you apply that 20-times multiple, you’re up to $5,000/oz.

For silver, if you use the historic ratio of an exchange ratio with gold of 16:1, you get to $312, so $200 is conservative. I think we’ll see these numbers within four years’ time.

TGR: You are talking about a 15-year bull market for gold and silver, starting in 2001 and ending in 2015 or 2016?

RM: Yes. I don’t think prices will necessarily fall dramatically, but gold and silver will reach the zenith of purchasing power relative to other asset classes. When gold peaked in 1980, Volcker was channeling up interest rates. If you had rolled out of bullion into fixed income then, you would have made a tidy gain.

TGR: Are you predicting prices of $5,000/oz. and $200/oz. as spikes, or plateaus that they will reach, stay at and trade around?

RM: I think you’ll have a spike at or above $5,000. Credit will become more expensive, and at some point credit will be denied. There’ll be a need for liquidity, and the metals address that need.

TGR: When prices reach those levels, any project that smells of gold or silver will become a prospect that people will try to put into production. Will we end up with a glut of gold and silver on the market?

RM: No, but the higher prices will spur more exploration. At the same time, it is getting harder to bring a mine into production. It takes longer and costs more. The regulators have put more rules in place. It is not so much that the rules are wrong, but it’s the extended time frames. The risk of putting a property into production has gone up dramatically.

You’re starting to see real limits on the amount of growth that can occur. In the 1990s and 2000s, very few people were going through mining schools because there weren’t many career opportunities. The people who built the physical plants have scaled back. We are seeing the impact of that lack of investment in education, in the productive capacity of the suppliers and huge jumps in the capital expenditures for various projects. Labor wants a larger piece and you see a lot more labor strikes. Finally, governments are looking at the mining industry as a very easy target to extract more money from because the industry doesn’t have a lot of friends.

TGR: There is also a problem finding mining engineers who have track records of putting projects with proven ounces into production. There is a lack of intellectual capital.

RM: You can see that manifesting itself all over the place. Coal mines in Australia are hiring miners from Tennessee. They commute between Tennessee and Australia on a three-week cycle. One headhunter told me he had an assignment to hire 400 people—mining engineers, geologists and related workers—for an iron ore mine. His instructions were to make offers 50% higher than their current salaries.

On top of that, the mines have been mining lower and lower grade, supported by the higher prices. Few high-grade deposits are being found. You have to put more capital in the ground and mine a lower quality or concentration of mineral to stand still.

TGR: Wouldn’t that increase the value of mid caps that have experienced personnel on the production, mine building and engineering side? They know how to put projects with tricky deposits and lower grades into production.

RM: You’re right. There really is a premium on production and on reserves. As the price of gold moves up, those mid caps will become more desirable to the seniors and attractive to investors. Companies doing exploration have proliferated. That creates confusion in the marketplace. Companies will have to go to greater lengths to differentiate themselves to attract capital. Perhaps that is one of the reasons why the exchange-traded fund (ETF) is so popular.

TGR: Could that explain why the juniors have lagged? Companies have projects that sound like they have great potential, yet the prices of most juniors are going nowhere.

RM: A couple of years ago, gold stocks had greater leverage than bullion; it was said that when bullion moves 1%, gold stocks will move 3%. People bought into that and they haven’t seen the performance. Perhaps they were looking initially at the seniors for leadership, but the seniors have been standing still while the price of gold has been running. You can look at someone like Kinross Gold Corp. (TSX:K; NYSE:KGC), which has been trading at a five-year low, or Barrick Gold Corp. (TSX:ABX; NYSE:ABX), and a number of others. They just haven’t delivered the performance. I think investors are asking, “If they are not delivering the performance, why will the intermediates or juniors deliver?”

With gold, whether you buy physical or an ETF, you don’t have any political risk. You don’t have taxation issues or labor strikes. You don’t have senior management making an investment that you don’t agree with. All of those variables conspire to take the enthusiasm out of the buying of the juniors. ETFs are an easy way to get into gold quickly at a lower perceived risk. I prefer to be in the juniors because they have the potential to explode to the upside if they are lucky with a discovery or they are in a right position next to a mine that is growing and the ore body continues onto their property.

RM: In mid-June, I put a proposal to the board of Minera Andes and US Gold to combine the two companies with an exchange ratio of 0.4 shares of the new company for every share of Minera and one share of the new company for each share of US Gold. The combined company would be a low-cost, mid-tier silver producer with a strong balance sheet, an income stream, a producing silver gold mine, a development pipeline of two silver and gold mines in Mexico and Nevada, and production out of Argentina. In June, if you combined the treasuries, there would be more than $120 million (M) in cash, no debt, and trade liquidity on the NYSE. It would be a low-cost producer based on the production projections from our El Gallo and Gold Bar properties, anticipated to go into production in 2014. We would be producing silver using gold as a byproduct for a negative cost. With the gold credit, our cost of production would be less than $1/oz.

The board has formed independent committees and hired financial and legal advisers to determine the appropriate ratio. The merger has to clear the SEC, which takes 30–45 days. Thirty-five days after the SEC approval, the shareholders will vote. In the case of US Gold, I won’t have a vote, so what the SEC calls the minority shareholders, who are actually the majority, will vote on the merger. Minera shareholders will take two votes on an “evaluation and fairness opinion,” one with me voting and one without me voting.

So far, the market has suggested this is a good combination. Both share prices went up on the day the proposal was announced and have been performing better than the silver price, the gold price or the junior index.

When I announced this deal, on a combined basis, my cost base in US Gold was $50M and $60M in Minera. Combined, based on the market, my investment is worth about $350M. If you were to compare that to the CEO holdings of almost every other gold or silver mining company, it’s right up at the top, about 27 times higher than the average CEO.

TGR: Congratulations. You’ll have cash flow from the Argentinian project, the blue sky of the Mexican silver, and the gold in Nevada with the silver credits. I can see why the shareholders were enthusiastic. Do you have a name for the company?

RM: The name McEwen Mining has been proposed. Given that we will be in copper, silver and gold, that name isn’t aligned with any one metal; it’s more reflective of what we’re doing.

TGR: You are also chairman of Lexam VG Gold Inc. (TSX:LEX; OTCQX:LEXVF; Fkft:VN3A). It sounds like on this deal you’re following in the footsteps of your Lexam merger up in the Timmins Mining Camp. Did you use that as a template?

RM: I started off with five companies and did three corporate restructurings over a period of eight years to create Goldcorp Inc. (TSX:G; NYSE:GG), and then bought Wheaton River Minerals to kick it up to another level.

One of my goals in US Gold was to qualify for inclusion in the S&P 500 in 2015. I think gold is under-represented on the S&P. Newmont Mining Corp. (NYSE:NEM) is the only gold stock listed there.

There is more than $1 trillion invested by index funds in the S&P 500. It’s a market that can add stability to your base and lower your cost to capital. That is an engine for growth, a low-cost capital. We’ve met five criteria for inclusion and have two remaining. We need a market cap in excess of $5 billion and four consecutive quarters of earnings. This combination moves us much closer to that objective.

TGR: Can you expand on Timmins Mining Camp?

RM: Lexam is exploring in the Timmins area in northern Ontario, historically the largest gold-producing area in Canada. Lexam has acquired a number of properties in the shadow of the headframe, the shaft, of some of the largest mines in the area. We have four drills going and released news about some interesting grades we found, extensions of vein structures that had been mined 40 or 50 years ago.

There are about 1.5 million ounces largely in an inferred resource. We are looking to get the remnants and to go deeper than previous mines. There are a couple of sweet spots that we want to explore. The company has no debt and it has about $12M in its treasury, which will allow it to explore for the next two years.

TGR: Is there a small company or two with which you have a particular affinity?

TGR: Are there any other topics you’ve been thinking about that might interests our readers?

RM: Right now we are looking at debt: the U.S. debt ceiling debate and the debt of sovereign states in Europe. I think any correction should be used as a time to accumulate.

The quiet summer is a good time to stake out the juniors and intermediates and take positions. We’ve seen periods like this where physical gold and the gold shares separate in terms of performance. In September 1979, which was just before the top in the gold price, gold went from $200 to $400/oz. in the space of a little over four months, but the gold stocks didn’t follow. It was as if the market didn’t believe the price of gold would hold up there. It wasn’t until September 1980 that gold stocks reached their highs. I believe that the market had to see the impact of the higher gold price on the cash flow and earnings before they would buy the stocks.

I think we’re in that period right now. I would argue that we are starting to see the seniors move—Barrick has been moving today with the gold price. These are incredible cash-flow generators right now. They are going to have to do something with their earnings, dividend them out or up their yields.

They also are going to look for growth. Barrick surprised everyone by buying a copper project, with cash. That was a curveball. I think they went into copper believing it was a better cash flow and cheaper than buying a gold property. Barrick is diversifying because they see opportunities. The seniors are doing deals to build the size of their companies, and that’s positive for the intermediates and the juniors. The seniors have been reaching right over the intermediates into the junior–producer/junior–explorer side. The longer this gap exists, the more attractive the juniors and intermediates will become.

TGR: Here at The Gold Report we’ve seen our readership increase along with the exponential increase in investor interest in gold and silver. Most U.S. investors don’t own mining stocks in their portfolios; do you think they will dip their toe into, if not bullion, then an ETF?

RM: Yes. The ETF has given more people exposure to gold. I liken the ETF to a mutual fund. It was often said that buying a mutual fund was the place to start investing in the stock market. Once investors become comfortable with the concept of being in the market, they start thinking about buying individual stocks because they think they understand how the market works.

I think the same principle applies to the ETF. Once investors are in there, they are going to start looking around and saying, “Well, this gold price is going to do very positive things to these mining stocks at some point. Maybe I’ll rotate some of my money out of the ETF or I’ll put in some additional money and it will go into individual stocks where I think I can see much larger gains down the road.”

TGR: Rob, thank you for your time and insights.

Rob McEwen, whose association with the resource industry spans nearly three decades, serves as CEO of US Gold Corp. and chairman of its board of directors. Five years ago he also became the company’s largest shareholder. Rob joined the Minera Andes board of directors in August 2008 and took over as president and CEO a year ago. Rob is also chairman of Lexam VG. He started building his reputation as the founder of Goldcorp, which has what is still considered the richest gold mine in the world in its Red Lake Mine in Ontario. He took Goldcorp from an investment company with $50 million market capitalization to one of the largest gold-mining companies in the world with an $8 billion market capitalization by the time he retired from the company. Rob has been recognized with awards such as Canadian Business’ Most Innovative CEO, Northern Miner’s Mining Man of the Year, Ernst & Young’s Ontario Entrepreneur of the Year (2002) and Prospectors and Developers Association of Canada (PDAC) Developer of the Year. A 1969 graduate of St. Andrews College—where the McEwen Leadership Program was modeled on Rob’s vision—Rob went on to obtain a bachelor’s degree from the University of Western Ontario. He earned his MBA from York University’s Schulich School of Business, where he serves on the Dean’s Advisory Board, holds the Alumni Recognition Award for Outstanding Executive Leadership (2007) and provides generous financial support. He also holds an honorary Doctor of Laws Degree from York University. With community-oriented efforts focused on encouraging excellence and innovation in healthcare and education, Rob’s generosity helped establish the McEwen Centre for Regenerative Medicine at the Toronto General Hospital and support the Red Lake (Ontario) Margaret Cochenour Memorial Hospital.

With economic uncertainty continuing to hamper economic growth, inflation has been non-existent, and mortgage rates have remained low. Current rates for conforming loans have dropped below the lows seen late last year to set new record lows for fixed rate mortgages, 5 year ARMs, and 1 year ARMs.

However, many new home buyers looking for a new mortgage and existing home buyers that would like to refinance their current mortgage have struggled to take advantage of these record low rates because of stricter lending standards put in place by most banks or a lack of equity in the home.

Fortunately for people looking for a mortgage that have been unable to obtain one, there have been rumors of another attempt by the federal government to assist existing homeowners swirling around Washington, and most of the plans under discussion are more focused on benefits for existing homeowners that are expected to end the decline in home prices, rather than improving bank balance sheets or handing out credits to new home buyers. These programs are expected to help existing home owners immediately and new home owners in the long term by increasing home values, making a home a safer investment and a quality asset again.

One assistance program that has already been put into place is a refinancing program for existing home owners with little to no equity in their home. The program is for mortgages owned by Fannie Mae that were originated before June 1, 2009 without any mortgage insurance, and it will allow qualified applicants to refinance their mortgage debt (including a second mortgage) up to 105% of your current home value at current market interest rates. These stipulations do limit the pool of eligible home owners, but for people that qualify, it is a great opportunity. You can begin by determining if your home loan is owned by Fannie Mae here.

If you believe that you qualify for the Fannie Mae program described above or are looking for any other type of mortgage assistance, you should contact a lender like Aurora Loans to start the process of obtaining a new mortgage or refinancing an existing one.

At 8:30 AM EDT, the preliminary GDP report for the second quarter of 2011 will be announced. The consensus is an increase of 1.1% in real GDP and an increase of 2.3% in the GDP price index. The real GDP estimate is 0.2% lower than the advance value for the second quarter of 2011, and the GDP price index is the same.

Also at 8:30 AM EDT, the monthly Corporate Profits report from the Bureau of Economic Analysis will be released.

At 9:55 AM EDT, Consumer Sentiment for the second half of August will be announced. The consensus is that the index will be at 56.0, which is 1.1 points higher than the value reported in the first half of the month.

At 10:00 AM EDT, Federal Reserve Chairman Ben Bernanke will speak at the Kansas City Fed conference in Jackson Hole, Wyoming on the state of the economy.